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Common knowledge of rationality and market clearing in economies with asymmetric information

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  • Ben-Porath, Elchanan
  • Heifetz, Aviad

Abstract

Consider an exchange economy with asymmetric information. What is the set of outcomes that are consistent with common knowledge of rationality and market clearing?

Suggested Citation

  • Ben-Porath, Elchanan & Heifetz, Aviad, 2011. "Common knowledge of rationality and market clearing in economies with asymmetric information," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2608-2626.
    • Handle: RePEc:eee:jetheo:v:146:y:2011:i:6:p:2608-2626
    DOI: 10.1016/j.jet.2011.10.015
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    References listed on IDEAS

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    1. Battigalli, Pierpaolo & Bonanno, Giacomo, 1999. "Recent results on belief, knowledge and the epistemic foundations of game theory," Research in Economics, Elsevier, vol. 53(2), pages 149-225, June.
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    6. Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, vol. 47(3), pages 655-678, May.
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    8. Kreps, David M., 1977. "A note on "fulfilled expectations" equilibria," Journal of Economic Theory, Elsevier, vol. 14(1), pages 32-43, February.
    9. R. Guesnerie, 2002. "Anchoring Economic Predictions in Common Knowledge," Econometrica, Econometric Society, vol. 70(2), pages 439-480, March.
    10. Roger Guesnerie, 2005. "Assessing Rational Expectations 2: "Eductive" Stability in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072580, December.
    11. McAllister, Patrick H., 1990. "Rational behavior and rational expectations," Journal of Economic Theory, Elsevier, vol. 52(2), pages 332-363, December.
    12. John C Harsanyi, 1997. "Games with incomplete information played by "bayesian" players," Levine's Working Paper Archive 1175, David K. Levine.
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    Citations

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    Cited by:

    1. Ayan Bhattacharya, 2022. "Arbitrage from a Bayesian's Perspective," Papers 2211.03244, arXiv.org.
    2. Samuli Reijula & Jaakko Kuorikoski & Timo Ehrig & Konstantinos Katsikopoulos & Shyam Sunder, 2018. "Nudge, Boost, or Design? Limitations of behaviorally informed policy under social interaction," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 2(1), pages 99-105, March.
    3. Lionel de Boisdeffre, 2025. "Equilibrium with asymmetric information and restricted participation: The no-arbritrage characterization," Documents de travail du Centre d'Economie de la Sorbonne 25014, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. Lukasz Balbus & Michael Greinecker & Kevin Reffett & Lukasz Wozny, 2025. "Interim correlated rationalizability in large games," Papers 2506.18426, arXiv.org.
    5. Carvajal, A. & Zhou, H., 2025. "Learning to bet (rationally) with logs," Journal of Economic Dynamics and Control, Elsevier, vol. 180(C).
    6. de Boisdeffre, Lionel, 2022. "Dropping rational expectations," Mathematical Social Sciences, Elsevier, vol. 115(C), pages 37-46.

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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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